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September 1, 2012

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Posted: 01 Sep 2012 12:06 AM PDT

The (If I Were To Do Any Rounding, It Would Certainly Be To Four Hours, Not Three) Marathon Man

Posted: 31 Aug 2012 08:44 PM PDT

Paul Ryan appears to have inflated his accomplishments as a marathon runner by some margin:

Paul Ryan Says He's Run Sub-3:00 Marathon: We have some new information on Republican vice presidential nominee Paul Ryan's claim in a radio interview of a sub-3:00 marathon.
A spokesman for the Romney-Ryan campaign e-mailed Runner's World today to say Ryan ran Grandma's Marathon in Duluth, Minnesota, while a college student in 1991.
When asked about Ryan's finishing time, the spokesman said, "His comments on the [radio] show were the best of his recollection."
Ryan's name does not show up in the 1991 race results provided by Grandma's. Runner's World checked 11 years of results for Grandma's Marathon, from 1988 through 1998, and found a finisher in the 1990 race by the name of Paul D. Ryan, 20, of Minneapolis.
Ryan's middle name is Davis, and he was 20 in 1990. The finishing time listed was 4 hours, 1 minute and 25 seconds.
We are awaiting confirmation from the Ryan camp that the vice presidential nominee is the Paul D. Ryan listed in the race results – and, if he is, whether he ran any other marathons faster than 4:01:25. ...
In the interview, after Ryan told Hewitt that he ran in high school, Hewitt asked if Ryan still runs. Ryan replied, "Yeah, I hurt a disc in my back, so I don't run marathons anymore. I just run ten miles or less." When Hewitt asked Ryan what his personal best is, Ryan replied, "Under three, high twos. I had a two hour and fifty-something."
Runner's World has been unable to find any marathon results by Ryan. Requests for more information from Ryan's Washington and Wisconsin offices, and from the Romney-Ryan campaign, have so far gone unanswered. ...

In the interview, after Ryan told Hewitt that he ran in high school, Hewitt asked if Ryan still runs. Ryan replied, "Yeah, I hurt a disc in my back, so I don't run marathons anymore. I just run ten miles or less." When Hewitt asked Ryan what his personal best is, Ryan replied, "Under three, high twos. I had a two hour and fifty-something." ...

Nicholas Thompson at the New Yorker follows up:
... I contacted the campaign this evening about the discrepancy. Ryan, through a spokesman, responded that he'd just mixed things up. "The race was more than 20 years ago, but my brother Tobin—who ran Boston last year—reminds me that he is the owner of the fastest marathon in the family and has never himself ran a sub-three. If I were to do any rounding, it would certainly be to four hours, not three. He gave me a good ribbing over this at dinner tonight." ...

Paul Krugman earlier today:

... I remember the 2000 campaign, when Al Gore was constantly hounded by claims of fibbing on trivial issues — claims that, by the way, were all, as far as I could tell, fabricated. These alleged fibs supposedly showed some deep defect in his character. So if Ryan is making false claims about his physical prowess, this is absolutely fair game. ...

Ryan's budget claims, and many of his claims about Obama are just as outlandish, so it does seem to fit with his character.

Fed Watch: Bernanke at Jackson Hole

Posted: 31 Aug 2012 11:36 AM PDT

Tim Duy (my quick reaction to the speech is here -- I agree with Tim that, despite today's speech, "additional easing is not a no-brainer"):

Bernanke at Jackson Hole, by Tim Duy: A current acute awareness of forecast bias leaves me almost hesitant to comment on today's speech by Federal Reserve Chairman Ben Bernanke.

What is forecast bias? Here I am thinking of the bias of Fed watchers struggling to interpret every bit of data and ever comment from policymakers in the context of their own views of the economy. One version of such bias is thinking the Federal Reserve will do what you think they should do. Because you view the economy as weak, you assume the Fed will do so as well, and react appropriately. Such a bias, of course, will lead to an erroneous interpretation of the data and Fedspeak as it relates to monetary policy.

I fear falling into a variation of this bias. For months, the flow of data and the Federal Reserve's own forecasts indicate the Fed will continue to fall short of both its employment and price stability mandates. This has been confirmed by numerous Fed speakers including Bernanke himself. Indeed, Bernanke has often stated disappointment with the pace of the recovery and, in particular, the costs of high levels of long-term unemployment. He has also said that nontraditional policy tools continue to be effective, indicating that the Fed could do more to boost the recovery.

Yet such action has been fairly limited. I tend to see the extension of Operation Twist as simply maintaining the status quo, not additional easing. Expectations for another round of quantitative easing have been disappointed for the last three meetings. The bar to additional action has simply been higher than many believed.

So now I ask myself if monetary inaction during 2012 leads me to place a "no action" bias in my own analysis. Am I picking out what I want to hear, and ignoring what I don't?

Now, in all honesty, I haven't had a strong conviction on the last two meetings. They seemed like relatively close calls. On average, though, the Fed has moved gradually toward another round of quantitative easing, with seemingly only Bernanke holding back policymakers.

Has Bernanke finally flipped sides, reverting to the Bernanke that we thought we knew back when he was writing about Japan? That is the question we ask as we take apart his Jackson Hole speech. And what biases are we bringing to the table when we do that analysis?

My first take on the speech was that Bernanke largely rehashed what I think was general knowledge, although with a somewhat dovish spin that would indicate a higher probability of quantitative easing at the next meeting than I had previously believed. No obvious signs, but certainly on the margin pointing to additional easing. And whenever I worry about my bias, I seek confirmation from the bond markets. Right now, yields are down 4 to 5 bp, which is what I think would be the expected market reaction from a slightly more dovish Bernanke. So far so good.

Bernanke's speech is largely backward looking. He examines the effects of nontraditional tools, both balance sheet tools and communication strategies, and concludes that both have been effective in easing financial conditions and boosting economic activity and employment. This result should really come as no surprise; Bernanke had previously expressed confidence that nontraditional tools had positive policy impacts. And he is not going to reverse course now and say that policy has been a failure.

More important is his subsequent cost/benefit analysis. For months we have been able to surmise that Bernanke believed the costs of additional action outweighed the benefits. If this wasn't the case, he would have eased already. Is Bernanke's analysis shifting?

Bernanke lists four potential costs: Impaired functioning of securities market, heightened inflation expectations, risks to financial stability from encouraging excessive leverage, and potential losses to the Fed's balances sheets. He quickly dismisses every concern, leading one to conclude that another round of QE is a no-brainer as the benefits obviously exceed the costs. He concludes the section with:

In sum, both the benefits and costs of nontraditional monetary policies are uncertain; in all likelihood, they will also vary over time, depending on factors such as the state of the economy and financial markets and the extent of prior Federal Reserve asset purchases. Moreover, nontraditional policies have potential costs that may be less relevant for traditional policies. For these reasons, the hurdle for using nontraditional policies should be higher than for traditional policies. At the same time, the costs of nontraditional policies, when considered carefully, appear manageable, implying that we should not rule out the further use of such policies if economic conditions warrant.

Now I hesitate - is this really a no-brainer? Do "economic conditions warrant" additional action? And notice that the cost/benefit analysis varies over time. While the benefits clearly outweighed the costs during the height of the crisis, is that still true today?

Bernanke then assess the current economy. He is clearly not happy with the current state of affairs:

Notwithstanding these positive signs, the economic situation is obviously far from satisfactory.

Specifically, he identifies persistent high rates of unemployment, and dismisses a structural explanation. Thus, with the problem being cyclical, we have a clear role for monetary policy. This seems to be "warrant" additional action. But what is the explanation for persistent high unemployment rates?

...First, although the housing sector has shown signs of improvement, housing activity remains at low levels and is contributing much less to the recovery than would normally be expected at this stage of the cycle.

Second, fiscal policy, at both the federal and state and local levels, has become an important headwind for the pace of economic growth...It is critical that fiscal policymakers put in place a credible plan that sets the federal budget on a sustainable trajectory in the medium and longer runs. However, policymakers should take care to avoid a sharp near-term fiscal contraction that could endanger the recovery.

Third, stresses in credit and financial markets continue to restrain the economy. Earlier in the recovery, limited credit availability was an important factor holding back growth, and tight borrowing conditions for some potential homebuyers and small businesses remain a problem today. More recently, however, a major source of financial strains has been uncertainty about developments in Europe...

Now I am concerned again, as Bernanke appears to be saying that the factors currently restraining the economy cannot be addressed by monetary policy. So what are the benefits to additional nontraditional tools in the current environment? Is he kicking the can back to Congress? Indeed, he later says:

In addition, in the present context, nontraditional policies share the limitations of monetary policy more generally: Monetary policy cannot achieve by itself what a broader and more balanced set of economic policies might achieve; in particular, it cannot neutralize the fiscal and financial risks that the country faces. It certainly cannot fine-tune economic outcomes.

This does not sound like he believes additional monetary policy would be particularly effective in the "present context." But he follows with this:

As we assess the benefits and costs of alternative policy approaches, though, we must not lose sight of the daunting economic challenges that confront our nation. The stagnation of the labor market in particular is a grave concern not only because of the enormous suffering and waste of human talent it entails, but also because persistently high levels of unemployment will wreak structural damage on our economy that could last for many years.

So now I am thinking he has focused his comments almost exclusively on the employment portion of the mandate, not the price stability part (which they aren't hitting anyway, but that is a different story). This alone should scream additional easing. But is Bernanke really hinting at a bias toward additional easing, or is he simply trying to convince everyone that he really cares about unemployment even though he has not acted more aggressively to date? He cares, but just can't do much about it? Or is that just my internal bias speaking, the bias from months of the Fed seeming to say one thing while doing another?

Attempting to take my own bias into account, my takeaways are:

1. Bernanke gives a very clear defense of nontraditional monetary tools to date. The benefits have clearly outweighed the costs. His rapid dismissal of the potential costs leads one to believe that he is more inclined than not to additional action. This is critical; he is the key to moving the middle ground to additional easing.

2. That said, the analysis is clearly backward looking. Do current conditions imply the same cost/benefit analysis, which Bernanke clearly states varies over time?

3. Bernanke express considerable concern about high levels of unemployment. But he also seems to say that the factors preventing more rapid labor market improvement are beyond the scope of monetary policy. This sounds like Bernanke is not confident that more monetary policy will be effective.

Taken together, Bernanke is attempting to be a man for all seasons, giving a spirited defense of the past that clears the way for additional action while explaining why such action might not be effective or taken in the future. Felix Salmon sums it up with:

The overall tone here, then, is defensive: Bernanke's on the back foot, trying to justify past and future actions against critics on all sides. And when an institution is in a defensive crouch, it's not going to do anything bold. The Fed was bold in 2008-9, at the height of the financial crisis; those days are over now. And so, whether we like it or not, any real boost for the economy going forwards is not going to come from the Fed, and is going to end up having to come from Congress instead. I'm not holding my breath.

Yes, if Bernanke is leaving it up to Congress, we have some troubling days ahead.

Bottom Line: On net, Bernanke's speech leads me to believe the odds of additional easing at the next FOMC meeting are somewhat higher (and above 50%) than I had previously believed. His defense of nontraditional action to date and focus on unemployment point in that direction. This is the bandwagon the financial press will jump on. Still, the backward looking nature of the speech and the obvious concern that the Fed has limited ability to offset the factors currently holding back more rapid improvement in labor markets, however, leave me wary that Bernanke remains hesitant to take additional action at this juncture. This suggests to me that additional easing is not a no-brainer, but perhaps that is just my internal bias talking.

Bad Political Discourse Drives Out Good

Posted: 31 Aug 2012 10:32 AM PDT

Chris Dillow tries to explain the poor quality of political discourse:

Adverse selection in political discourse, by Chris Dillow: ...there is adverse selection in political debate: fanatics are given attention whilst sober, rational voices are overlooked. There are four channels through which this happens:
- Fanatics think their beliefs are so important and true that they set up lobbying groups and "thinktanks" to promote them, whilst rational people devote less time and organization to pushing their opinions. ...
- Producers want "good" TV/radio, and this means having a violent debate between people with well-defined positions who can talk in soundbites. ...
- People mistake confidence for knowledge, and so give too much credence to the irrationally overconfident.
- A tendency has emerged for people to respect strongly-held opinions... This, of course, in the opposite of what should be the case. The fact that someone believes strongly in something is a reason for us to disrespect their belief and to discount it as the product of a fevered, fanatical and irrational mind.
What I'm suggesting here is an adjunct to something Mancur Olson said in the 1960s. He pointed out that small numbers of people with large interests would organize themselves better than large numbers with smaller interests. The upshot, he said, was that politics would give too much weight to small vested interests to the detriment of aggregate well-being. ... Small groups with strongly-held beliefs are given more credence and deference than they should have.
And this, in turn, implies that the mass media can sometimes undermine rational political discourse rather than promote it.

Fed Watch: 2012 Oregon Road Trip

Posted: 31 Aug 2012 09:08 AM PDT

Tim Duy:

2012 Oregon Road Trip, by Tim Duy: Something to occupy your time while you wait for Federal Reserve Chairman Ben Bernanke to speak at Jackson Hole...
We are on the tail end of what is becoming the annual end of summer Oregon road trip. This year we headed out east to the Wallowa Mountains, which, depending on the geologist you talk to, may or may not be considered a part of the Blue Mountains. The Wallowa Mountains are formed from granite lifted by underlying magna, with the landscape later carved by glaciers. The region differs greatly from the volcanic peaks of the Cascades that many typically associate with Oregon. Especially neat are rivers filled with granite pebbles:


Our first destination was the city of Joseph, notable for an industry cluster of three bronze foundries. The main strip has what must be the most large bronze sculptures per capita of any city on the US:


I have a certain affinity for this type of region, dominated by cattle ranching and related agriculture (hay). If the number of shiny, new F150s is any guide, the region must be coming off of some fat years. After a night in a roadside motel (I couldn't bear the thought of setting up camp in the dark with two tired and hungry kids), we made our way to our anticipated campground at the Wallowa Lake State Park.
We spent one night. It was not our kind of place. To be sure, it was clean and well run. But it was large, with no separation between camp sites. For my wife and I, whose camping experience together amounts almost exclusively to wilderness trips backpacking throughout much of the Oregon Cascades and the Olympic National Park in Washington, this just wasn't going to work. Luckily, because of tight reservations, we were forced to pack up the truck with the expectation of a new site within the same campground. Thinking that the site would not be open, we took to the road to explore the region for a few hours.
We stumbled up the Lostine River, and found numerous Forest Service campgrounds. No showers, but that isn't our camping style anyway. We settled on the Shady Campground near the top of the road. Large, well-separated, clean campsites next to the river. Not having this change in mind, after we set up camp I had to head back down to the town of Lostine for a fresh supply of ice. Not that I minded; I admit to enjoying trashing the overall gas mileage blowing up dust on gravel roads. I realized at the end I had no cash and, as these things seem to go, it turned out the credit card machine at the general store (in continuous operation for more than 100 years) was down. No problem, though. The owner doesn't like to send people back up the river empty handed, so he agreed to send me a bill if I didn't pass by later in the week. Yes, this still does happen in some part of the world. So I told him my name was Paul Ryan and gave him a Wisconsin address. No, of course not.
The Wallowa Mountains contain the Eagle Cap Wilderness, an opportunity to get high (altitude) fast. The Maxwell Lake trail begins at the Shady Campground:



After three miles of switchbacks alternating through forest and meadows, the trail shifts to a much steeper grade that carries you into a wonderful basin with vistas such as this:


Maxwell Lake itself is at the bottom of a steep-sided basin:


The hike, according to the iPhone GPS:



And, honestly, we never thought we would make it, but our littlest hikers did a wonderful job:


They don't realize yet the doors this opens.
We spent three nights on the Lostine before heading back west (after paying my tab in Lostine) through the Elkhorn Range and its old gold rush towns from the 1800s. A travel find was the Clyde Holliday State Park, sitting right on Highway 26 west of John Day. Thirty one campsites, well-separated, with showers, $22 a night. Not a true camping experience, but a good stopping point. As an added bonus, walking distance to a fishing pond. I was skeptical - late in the season, the water level was low and the weed level was high. But it was stocked annually, and I managed to pull five rainbow trout out of the murky water, throwing them all back to be tortured by the next fisherman.
We continued west, stopping at the John Day Fossil Beds, first the Sheep Rock Unit:


Great visitor center (National Park Service) detailing the extent of the fossils collected in the region. Very rich beds in which the fossils of various flora and fauna are found together for a more complete picture of life in the past:



You can watch the paleontologists work through a glass window:


We also stopped at the Painted Hills Unit:


Striking landscapes. We continued on to meet friends staying at Sunriver, and are now on the last legs of the trip with a few days in the Crescent Lake area, back with a steady internet connection. Now waiting for Bernanke like everyone else.

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